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The Solvent Liquidation Process Explained


What is a Members Voluntary Liquidation? 

 

A Members Voluntary Liquidation (MVL) is used when a company is solvent and the shareholders wish to close down the company. This can be due to a number of reasons including: 

  • Retirement
  • The company no longer having a purpose
  • Owners of the company deciding to stop trading

 

Why is it a good process?

 

  • All creditors are paid in full
  • Shareholders receive funds called a capital distribution and pay only 10% tax
  • The process brings the company to an end in an orderly way

 

The Members Voluntary Liquidation Process:

 

1) Instruct a Licensed Insolvency Practitioner 

 

To place your company into Members' Voluntary Liquidation you will need to instruct a Licensed Insolvency Practitioner to act on your behalf in carrying out the correct procedure governed by the Insolvency Act 1986.

 

2) Board Meeting 

 

The Directors of the company will be required to convene and hold a board meeting at which the directors, among other things, will resolve to issue notices to the shareholders of the company convening an Extraordinary General Meeting (EGM), for the purposes of putting the company into solvent liquidation

 

3) Declaration of Solvency  

 

The Directors will also resolve to sign a Declaration of Solvency, which is a document showing the assets and liabilities of the company and confirms that the company can pay its debts in full within 12 months including statutory interest. This needs to be signed and sworn in front of a solicitor by  all or a majority of Directors,  

 

4) Notice to Shareholders 

 

The notices of the EGM must be issued to all of the Shareholders of the company giving at least 21 days' notice. However, with 95% approval, this notice can be reduced.  

 

5) Extraordinary General Meeting 

 

The purpose of the EGM is to enable the Shareholders to pass a number of resolutions in relation to the winding up including; a Special Resolution to place the company into Liquidation and an Ordinary Resolution to appoint the Liquidator.  

6) The Liquidation

 

Following the appointment of the liquidator, the directors’ powers in relation to the company cease. It is now the liquidator’s role to sell all assets, or distribute them in specie, settle all liabilities and then distribute funds to the shareholders.

 

The Timothy James Partnership works to help businesses in financial difficulty and we can advise you on how to deal with situations which may put your business at risk of insolvency.


Added: 15 Dec 2016 09:33


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The Timothy James Partnership

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Insolvency Practitioners Association
About Us


We are an independent firm of specialist Licensed Insolvency Practitioners located in Bromsgrove, Worcestershire.

At The Timothy James Partnership, we work very closely with local businesses and professionals, providing guidance on formal insolvency procedures and advice on restructuring businesses.

We recognise that at times, companies find themselves in difficult financial circumstances and our aim is to provide practical solutions in these situations.